Bridgeport's Finances Troubled But City Not Bankrupt, Judge Rules

BRIDGEPORT -- A federal judge dismissed Bridgeport's bankruptcy petition Thursday, saying the city is in serious financial trouble but will not run out of money for at least a year.

U.S. Bankruptcy Judge Alan H.W. Shiff, ruling eight weeks to the day after Mayor Mary C. Moran's historic bankruptcy filing, said that even if Bridgeport is unable to maintain a balanced budget this year, a $25 million cushion of borrowed money will prevent the city from slipping into insolvency.

Moran, who received the news on her 58th birthday, defended her decision to seek bankruptcy protection and said the city still needs help to avoid financial disaster.

"The only thing that the court said is, you are not now insolvent," Moran said. "However, if the state and the unions do not cooperate, certainly we will be [in] a very short time."

Moran, speaking at a press conference two hours after the ruling was released, said she had not decided whether the city would appeal Shiff's decision to the U.S. District Court. But Richard Zeisler, the bankruptcy attorney representing the city, said he probably will recommend an appeal.

Had Shiff ruled differently, Bridgeport would have become the largest city in the country to reorganize its debts under Chapter 9 of the U.S. Bankruptcy Code. By seeking that protection, Bridgeport attracted the attention of bankruptcy lawyers and officials of distressed municipalities across the country.

State Attorney General Richard Blumenthal, who led the court battle against the bankruptcy petition, praised Shiff's decision.

"It's a victory, not only for the state, but for Bridgeport and the citizens of Bridgeport," Blumenthal said. "They will be saved the tremendous cost of bankruptcy."

But Moran said the filing had cast a spotlight on the plight of American cities. "I think we have woken up urban America. I think we have woken up the federal government," Moran said.

Even as the judge's landmark decision was being digested in Bridgeport, Moran was setting the stage for the next great battle.

The state board set up to oversee Bridgeport's finances had restricted the city's ability to dip into the $25 million cash reserve. But Moran -- who needs to close a $16 million gap in this year's budget -- said Thursday that Shiff's ruling makes that money fair game.

"I intend to follow the direction of Judge Alan Shiff in using the funds he has indicated are available but to which the financial review board has previously denied access," Moran said.

And after that, she read the one sentence of her three-page statement that was typed in capital letters. "Accordingly," she said, "I will not raise your taxes as a result of this court's decision."

The small crowd of supporters in her conference room applauded.

Moran's stance is not likely to go over well with the review board, which is scheduled to meet next Thursday and will discuss the city's bankruptcy bid. Donald A. Kirshbaum, executive director of the review board, said Thursday it was too early to say how the board would respond to Moran's plans.

Moran said she also expects the state to follow through on its pledge to help Bridgeport solve its financial problems. Throughout the six-day trial, Blumenthal said the administration of Gov. Lowell P. Weicker Jr. was committed to assisting Bridgeport and all the state's cities.

"I intend to hold the state to the promise it has made," Moran said.

Weicker, who praised Shiff's ruling, said Thursday that assistance would be coming.

"The policies of this administration remain the same, which is that we do have a very large problem with the cities of this state and we intend to address that."

But Weicker has said Connecticut's cities will have to wait until the state breaks its own budget logjam.

Had the city won its case, it would have allowed Bridgeport to do what other distressed municipalities can only dream about. Subject to the court's approval, Bridgeport officials would have picked through the city's labor contracts and other obligations and erased provisions that were deemed financially troublesome.

Labor leaders were overjoyed Thursday. Gerald W. McEntee, national leader of the American Federation of State, County and Municipal Employees, called the ruling a "major victory for public employees and for collective bargaining in the public sector."

"It stops Bridgeport's caper to void the city's labor contracts and bust the unions dead in its tracks," McEntee said. "If today's ruling by Judge Shiff had been in favor of the city's petition, the decision would have opened the floodgates to a deluge of copycat filings around the country."

Moran's decision to file for bankruptcy proved enormously popular with voters in Bridgeport. The mayor insisted Thursday that her motivations were not political, but said she did not believe she would be hurt by the bankruptcy petition's failure.

"I did what I really believed had to be done," Moran said. "I think the taxpayers know how hard I have been working."